Auto Insurance Quotes ~ Types of Life Term Insurance Policies : When you are considering taking out a short term Life Insurance policy otherwise known as Life Term Insurance it is important to recognise that there are several Life Term Insurance policies available in today's market, each with their own distinctive features.
These types of contract are called 'short term Life Insurance' because they all run for a short period of time, ranging from 5 to 35 years.
The factors of a Life Term Insurance Policy are displayed below:
- A pre-determined lump sum is paid out upon the death of a life assured, this sum is known as the sum insured
- There is no element of savings or investment
- Applicant decides the amount of time(term) that the policy is to run for
- Applicant decides the amount of life insurance cover on the policy
- There are no benefits upon cancellation or at the end of the term when the policy expires
- There is a high level of cover for a relatively small premium
On this page we will provide you with a basic breakdown to show the difference between the different Life Term Insurance policies.
Level Life Term Insurance Policy
A Level Life Term Insurance Policy is the most popular type of Life Term Insurance. The applicant chooses a sum assured and how long the policy is to run for. The sum assured remains the same throughout the whole policy as does the premium. All of the above factors apply to this contract.
Decreasing Life Term Insurance Policy
This is the second most popular type of Life Term Insurance Policy and is the cheapest. It is also referred to as Mortgage Protection Insurance. A Decreasing Life Term Insurance policy is designed to cover repayment mortgages and any other form of repayment loan. The sum assured periodically reduces throughout the term of the policy but the premium remains level all the way through. This is why it is the cheapest form of Life Term Insurance Policy. All of the above factors apply to this contract.
Increasable Life Term Insurance Policy
An Increasable Life Term Insurance Policy is also available from some insurers. This policy will provide for the sum assured to be increased at regular intervals. Further evidence of health is not required when the sum insured is increased. Due to the sum insured being able to be increased the insurer will charge a higher premium. If at such intervals the sum insured is increased then the premiums will also increase accordingly. The policy is designed to protect against inflation. All of the above factors apply to this contract.
Convertible Life Term Insurance Policy
A Convertible Life Term Insurance Policy will begin as a Level Life Term Insurance Policy. At the end of the policy, providing it is still in force and no claim has been made of course, there is the option to convert the policy into a Whole of Life Policy. The sum assured remains the same throughout the life of the policy. If it is converted the insurer will likely restrict the amount of cover on the new policy to the level it was running at originally. The initial Level Life Term Insurance Policy will have all of the above factors applying to it but when the policy is converted to a Whole of Life Policy it may only have factors 1,3,4 and 6 applicable.
Renewable Life Term Insurance Policy
This is usually a short term Life Insurance Policy on a level basis which can be renewed by either 3 or 5 years come the end of the policy. At the renewal point no further medical evidence is sought by the insurer. However when the policy is renewed the Life Insurance rates applicable at that time can result in a higher premium for the renewed term. All of the above factors apply.
Family Income Benefit Policy
A Family Income Benefit Policy is a form of Decreasing Life Term Insurance Policy which is intended to replace lost income. In the event of the death of the life assured a series of regular payments are made until the end of the term. A lump sum can be taken instead of regular payments, however this amount will likely be less if the regular payment option had been selected.
